Microsoft Makes Its Case in Hearing

Armed with an array of PowerPoint charts, a team of Microsoft Corp. lawyers and economists Wednesday sought to refute charges that the software giant used its market power to unfairly crush competition in Europe.

Observers at the closed-door hearing before the European Commission described Microsoft’s eight-hour presentation as a polished and passionate argument against sanctions that could include billions of dollars in fines and an order to modify the company’s flagship Windows operating system.

Wednesday marked the first of three days of hearings into whether Microsoft improperly leveraged the dominance of Windows to win position in the European market for servers and audiovisual software.

At the core of the commission’s case is the argument often made by competitors that Microsoft manipulates Windows to ensure that rival software will not work as well as its own.

The hearings in the concrete, bunker-like Borschette complex include Microsoft rivals as well as representatives from the 15 European Union governments. The proceedings are closed to the public and press.

It was not immediately clear what effect Microsoft’s presentation had on regulators, who are expected to rule on the case in the spring. Although the commission could fine Redmond, Wash.-based Microsoft up to 10% of its global sales -- $32 billion last year -- such fines rarely exceed 1%.

Microsoft ally Jonathan Zuck, head of the Assn. for Competitive Technology, described Wednesday’s presentation as “kind of overwhelming.”

Another observer called it a “very glitzy presentation that on style points was an A, but on substance and accuracy was a D.”

The stakes are high for Microsoft, which has long been under investigation by European and U.S. regulators. Three years ago, a U.S. appeals court found that Microsoft maintained an illegal monopoly, in part, by bundling its Explorer Web browser into Windows to crush rival Netscape.

The Bush administration reached an out-of-court settlement that allowed Microsoft to keep integrating its Web browser into Windows. That deal required the company to allow computer makers to bundle alternative Web browsers with Windows and forced Microsoft to disclose more of the operating system’s code to competing software developers.

The European Commission case focuses on Microsoft’s dominance in server software and on the bundling of its Media Player with Windows. Many expect European regulators to be harsher on Microsoft than their counterparts in Washington.

In addition to facing fines, Microsoft could be forced to remove Media Player from Windows and make more of the computer code that powers the operating system available to other software developers.

Microsoft has argued that its settlement with the Justice Department provided enough detail of Windows’ inner workings to ensure competitive software design.

But the historically combative company has nonetheless made conciliatory statements leading up to the hearings. Throughout the day Wednesday, Microsoft executives expressed optimism and even at times demonstrated some levity in remarks outside the hearing room.

Microsoft General Counsel Brad Smith, for instance, told reporters that “hope springs eternal,” when asked whether the company might reach a settlement with European regulators.

Microsoft’s attitude prompted some critics to say the company is not paying serious enough attention to the anti-competitive charges that have been lodged against it.

One of those detractors, class-action lawyer Michael Hausfeld, said he planned to show European regulators a videotaped deposition of Microsoft Chief Executive Steve Ballmer to illustrate the company’s alleged highhanded culture.

“In one clip, we ask [Ballmer] -- after Microsoft has gone through four investigations, one trial, two continents -- if he has any understanding of the word ‘monopoly,’ ” Hausfeld said. “He actually laughs and says, ‘Yes, it’s something I play with my children.’ ”

But Microsoft spokesman Jim Desler accused the company’s critics of using the hearing to grandstand.

“Much of what is said by partisans about this proceeding should be treated with great skepticism, particularly when they use comments out of context,” Desler said.